# Accounting Chapter 8 Homework Palo Company and Subsidiary Sheila Company

Type Homework Help
Pages 9
Words 2063
Authors Paul M. Fischer, Rita H. Cheng, William J. Tayler

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8–21 Ch. 8—Problems
Problem 8-3, Continued
Palo Company and Subsidiary Sheila Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2018
Goodwill ......................................................... ................. ................. (D2) 95,000 ................. ................. ................. ................. 95,000
Liabilities ........................................................ (750,000) (210,000) ................. ................. ................. ................. ................. (960,000)
Common Stock (\$10 par)—Palo .................... (1,500,000) ................. ................. ................. ................. ................. ................. (1,500,000)
Paid-In Capital in Excess of Par—Palo .......... ................. ................. ................. (CVb) 40,480 ................. ................. ................. (40,480)
Totals .......................................................... 0 0 1,059,000 . 1,059,000 ................. ................. .................
Consolidated Net Income ........................................................................................................................................ (149,000) ................. ................. .................
To NCI (see distribution schedule) ...................................................................................................................... 26,640 (26,640) ................. .................
To Controlling Interest (see distribution schedule) ............................................................................................... 122,360 ................. (122,360) .................
Problem 8-3, Concluded
(CVa) Convert the investment to the equity method for share of prior income [80% ×
(\$180,000 – \$100,000)].
(1) Building, \$80,000 and (2) Goodwill, \$95,000.
(A) Amortize excess for current year and two prior years: Building = \$4,000 per year.
(EI) Eliminate profit in ending inventory (\$10,000 × 20% = \$2,000).
Subsidiary Sheila Company Income Distribution
Profit in ending inventory ............... \$2,000 Internally generated net
Building amortization ..................... 4,000 income ................................ \$80,000
Parent Palo Company Income Distribution
Internally generated net
income ................................ \$ 75,000
PROBLEM 8-4
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (60%) (40%)
Fair value of subsidiary ........................ \$260,000 \$156,000 \$104,000
Less book value of interest acquired:
Common stock (\$5 par) .................. \$100,000
Paid-in capital in excess of par ...... 50,000
Problem 8-4, Continued
Mitta Corporation and Subsidiary Train Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
Eliminations Consolidated Controlling Consolidated
Trial Balance
Mitta Train Dr. Cr. Statement NCI Earnings Sheet
Cash ............................................................... 106,200 63,500 ................. ................. ................. ................. ................. 169,700
Accounts Receivable ...................................... 113,600 60,000 ................. ................. ................. ................. ................. 173,600
................. ................. ................. (D) 19,200 ................. ................. ................. .................
Property, Plant, and Equipment ..................... 1,800,000 360,000 ................. ................. ................. ................. ................. 2,160,000
Accumulated Depreciation ............................. (600,000) (89,500) ................. ................. ................. ................. ................. (689,500)
Goodwill ......................................................... ................. ................. (D) 30,000 ................. ................. ................. ................. .................
................. ................. ................. ................. ................. ................. ................. 30,000
Sales .............................................................. (1,950,000) (600,000) (ISa) 30,000 ................. ................. ................. ................. .................
................. ................. (ISb) 20,000 ................. (2,500,000) ................. ................. .................
Subsidiary Income .......................................... (32,000) ................. (CY1) 32,000 ................. ................. ................. ................. .................
Cost of Goods Sold ........................................ 1,170,000 420,000 (EIa) 2,000 (BIa) 1,500 ................. ................. ................. .................
8–25 Ch. 8—Problems
Problem 8-4, Continued
Mitta Corporation and Subsidiary Train Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
(Concluded)
Eliminations Consolidated Controlling Consolidated
Trial Balance
Mitta Train Dr. Cr. Statement NCI Earnings Sheet
(CV) Conversion entry for stock sale:
Interest after sale [64% × (\$262,000 + \$30,000 goodwill + \$100,000 proceeds)] \$250,880
Interest prior to sale [60% × (\$262,000 + \$30,000 goodwill)] 175,200
(CY1) Eliminate the current-year entries for income.
(CY2) Eliminate the current-year entries for dividends.
(EL) Eliminate parent’s 64% share of subsidiary equity.
(EIa) Eliminate profit on Mitta’s goods in Train’s ending inventory (\$8,000 × 25% = \$2,000).
Sales from Train to Mitta:
(BIb) Eliminate profit on Train’s goods in Mitta’s beginning inventory (\$6,000 × 30% = \$1,800), allocate 64% and 36%.
(ISb) Eliminate 2017 sales of \$20,000.
Problem 8-4, Concluded
Subsidiary Train Company Income Distribution
Unrealized profit in Internally generated net
ending inventory ...................... \$600 income ................................ \$50,000
Realized profit in
beginning inventory ............. 1,800
PROBLEM 8-5
Investment in Webo Company, January 1, 2015:
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary ........................ \$400,000 \$320,000 \$ 80,000
Less book value of interest acquired:
Problem 8-5, Continued
Barns Company and Subsidiaries Webo Company and Elcam Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
Consoli-
Eliminations Consolidated Controlling dated
Trial Balance
Barns Webo Elcam Dr. Cr. Statement NCI Earnings Sheet
Cash ................................................ 110,000 26,000 165,200 ............... ............... ................. ............. ............. 301,200
Investment in Elcam Company
Bonds ........................................ ................. 148,000 ................. ................ (B) 148,000 ................. ............. ............. ...............
Property, Plant, and Equipment ...... 700,000 525,000 834,000 ................ (F1) 2,000 ................. ............. ............. 2,057,000
Paid-In Capital in Excess of
Par—Elcam ................................ ................. ................. (70,000) (ELE) 56,000 ............... ................. (14,000) ............. ...............
Retained Earnings—Barns .............. (302,200) ................. ................. (CVE) 75,000 (CVW) 40,000 ................. ............. ............. ...............
................. ................. ................. (CVW) 2,667 ............... ................. ............. (264,533) ...............
8–29 Ch. 8—Problems
Problem 8-5, Continued
Barns Company and Subsidiaries Webo Company and Elcam Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
(Concluded)
Consoli-
Eliminations Consolidated Controlling dated
Trial Balance
Barns Webo Elcam Dr. Cr. Statement NCI Earnings Sheet
Operating Expenses ........................ 405,000 280,000 290,500 ............... (F2) 100 975,400 ............. ............. ...............
Interest Expense ............................. 16,200 2,500 16,400 ............... (B) 12,300 22,800 ............. ............. ...............
Total NCI ................................................................................................................................................................................................... (197,011) ............. (197,011)
Retained Earnings—Controlling Interest, December 31, 2016 ..................................................................................................................................... (361,589) (361,589)
Totals .......................................................................................................................................................................................................................................... 0
Problem 8-5, Continued
(CY2) Eliminate intercompany dividends (4,000/4,500 × \$22,500 = \$20,000 for Webo divi-
dends and 80% × \$10,000 = \$8,000 for Elcam dividends).
(ELW) Eliminate 4,000/4,500 interest in Webo equity accounts, including treasury stock
against the investment account.
(ELE) Eliminate 80% of Elcam equity accounts against investment in Elcam account.
(B) Eliminate intercompany interest income and expense. Eliminate balance of investment
in bonds against 75% of the bonds payable. The gain on retirement as of the begin-
ning of the year is calculated as follows:
Gain remaining at year-end:
Carrying value of bonds at December 31, 2016
× 8%) + (\$1,200/3)] × 75%} ...................................... 12,300 700
Gain at January 1, 2016 ................................................... \$2,100
(F2) Reduce depreciation on equipment [1/2 × (\$2,000 ÷ 10) = \$100].
(IS) Eliminate intercompany sales.
(EI) Eliminate profit in ending inventory relating to sales made by Barns
Subsidiary Elcam Company Income Distribution
8–31 Ch. 8—Problems
Problem 8-5, Concluded
Subsidiary Webo Company Income Distribution
Internally generated net
Income ............................ \$ 80,500
Parent Barns Company Income Distribution
Unrealized profit in Internally generated net
ending inventory ...................... \$15,000 income ............................ \$ 30,800
Gain on equipment sale ................ 2,000 80% × Elcam adjusted
income of \$44,500 .......... 35,600
PROBLEM 8-6
Mary’s investment in John on January 1, 2016 (9,000 shares):
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (60%) (40%)
Fair value of subsidiary ........................ \$340,000 \$204,000 \$136,000
Less book value of interest acquired:
Common stock (\$10 par) ................ \$150,000
Paid-in capital in excess of par ...... 75,000
Worksheet Amortization
John’s investment in Joan on January 1, 2017 (5,000 shares):
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (50%) (50%)
Fair value of subsidiary ........................ \$150,000 \$ 75,000 \$ 75,000
Problem 8-6, Continued
Mary’s investment in Joan on January 1, 2018 (4,000 shares plus effective control of 5,000
shares):
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (90%) (10%)
Fair value of subsidiary ........................ \$180,000 \$162,000 \$ 18,000
Less book value of interest acquired:
Common stock (\$10 par) ................ \$100,000
Retained earnings .......................... 80,000
Problem 8-6, Continued
Mary Company and Subsidiaries John Company and Joan Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2018
Consoli-
Eliminations Consolidated Controlling dated
Trial Balance
Mary John Joan Dr. Cr. Statement NCI Earnings Sheet
Cash ................................................ 62,500 60,000 30,000 ................ ............... ................. ............. ............. 152,500
................. ................. ................. ................ (EL2) 72,000 ................. ............. ............. ...............
Investment in Joan Company—John ................. 107,500 ................. ................ (CY3) 17,500 ................. ............. ............. ...............
................. ................. ................. ................ (EL3) 90,000 ................. ............. ............. ...............
Property, Plant, and Equipment ...... 2,250,000 850,000 350,000 ............... (F1) 10,000 ................. ............. ............. 3,440,000
Paid-In Capital in Excess of
Par—John .................................. ................. (75,000) ................. (EL1) 45,000 ................ ................. (30,000) ............. ...............
Retained Earnings—John ............... ................. (130,000) ................. (EL1) 78,000 (NCI) 16,000 ................. (68,000) ............. ...............
Common Stock (\$10 par)—Joan ..... ................. ................. (100,000) (EL2) 40,000 ................ ................. ............. ............. ...............

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